07/08/2011 07:26 BST | Updated 06/10/2011 10:12 BST

David Cameron And Nicolas Sarkozy In Crisis Talks

PRESS ASSOCIATION -- Prime Minister David Cameron has broken into his holiday to discuss the crisis in the world's financial markets with French President Nicolas Sarkozy.

Downing Street said the two leaders agreed in their phone conversation to work together and keep in contact over the coming days.

Meanwhile, Business Secretary Vince Cable insisted that Britain remains in "a fairly good position" to weather the current financial storms because of the market credibility earned by the Government's deficit reduction strategy.

Mr Cable was speaking as the world absorbed the shockwaves of the downgrading of America's cherished Triple-A credit rating for the first time in its history.

Rating agency Standard & Poor's said it was marking the US down a notch to AA+ because the deficit reduction plan passed by Congress on Tuesday did not go far enough to stabilise the country's debt situation.

However, it was not immediately followed by the two other major credit rating agencies, Moody's and Fitch, which continued to rank the US as an AAA nation, alongside Britain.

The downgrade sparked a biting response from America's largest creditor, China, which called on the US to end its "debt addiction" and even suggested that the dollar may have to cede its position as the world's reserve currency. India's finance minister Pranab Mukherjee said the situation was "grave".

The development came at the end of a week of turmoil on markets around the world, which saw the FTSE 100 in London lose almost 10% - or £150 billion - of its value, while the eurozone was rocked by fears over whether Italy and Spain can pay their debts.

Following this evening's phone conversation, Downing Street said: "The Prime Minister this evening spoke by telephone to

President Sarkozy of France. They discussed the euro area and the US debt downgrade. Both agreed the importance of working together, monitoring the situation closely and keeping in contact over the coming days."

Unconfirmed reports suggested that finance ministers or officials of the G7 group of industrialised nations may hold a telephone conference call over the weekend to steady nerves ahead of the markets opening on Monday.